Perpetual Wholesale Funds

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1 Perpetual Wholesale s Supplementary Product Disclosure Statement number 1 dated 14 September 2011 for Product Disclosure Statement issue number 6 dated 1 June 2011 Issued by Perpetual Investment Management Limited ABN AFSL About this Supplementary Product Disclosure Statement This Supplementary Product Disclosure Statement number 1 (SPDS1) is to be read in conjunction with Product Disclosure Statement issue number 6 dated 1 June 2011 (PDS) for Perpetual Wholesale s. From 14 September 2011, the Product Disclosure Statement for Perpetual Wholesale s comprises: the PDS this SPDS1. Purpose of this SPDS1 The purpose of this SPDS1 is to: discontinue offering investment in Perpetual Wholesale Monthly Income (page 7 of the PDS) clarify the basis on which management costs are charged for Perpetual Wholesale SHARE-PLUS Long- Short (page 10 of the PDS) broaden the objective and amend the investment approach for Perpetual Wholesale International Share (page 11 of the PDS) update disclosure to allow for the allocation to Australian shares in the following diversified s to potentially include investment into underlying funds that take short positions: Perpetual Wholesale Conservative Growth (page 11 of the PDS) Perpetual Wholesale Diversified Growth (page 12 of the PDS) Perpetual Wholesale Balanced Growth (page 12 of the PDS). s profiles Perpetual Wholesale Monthly Income The profile for Perpetual Wholesale Monthly Income on page 7 of the PDS is deleted. All other references to Perpetual Wholesale Monthly Income throughout the PDS are also deleted. Perpetual Wholesale SHARE-PLUS Long-Short Management cost The footnote 10 reference within the Management cost (pa) for Perpetual Wholesale SHARE-PLUS Long-Short on page 10 of the PDS is moved to outside the bracketed text as follows % (plus performance fee) 10 Footnote 10 on page 13 of the PDS is deleted and replaced with the following text. 10 The management cost percentage quoted is based on the s gross asset value, which is the sum of both the s long and short positions. Perpetual charges the a performance fee if its investment performance (as a whole) exceeds its performance hurdle and other conditions are met see Performance fees on page 17 of the PDS for details. Perpetual Wholesale International Share Objective The Objective for Perpetual Wholesale International Share in the table on page 11 of the PDS is deleted and replaced with the following text. Aims to provide long-term growth through investment in international shares. PERPETUAL WHOLESALE FUNDS 1

2 Investment approach The Investment approach for Perpetual Wholesale International Share in the table on page 11 of the PDS is deleted and replaced with the following text. The primarily invests in publicly traded, or to be listed, global equity securities, including emerging markets. The focus is on investing in stocks of companies the investment manager believes are solid but temporarily out-of-favour and provide above-average total return potential. The country and sector allocations within the are a result of the stock selection process. The currency exposure of the is typically unhedged, although currency hedging may be used to protect investments at the discretion of the investment manager. Derivatives may be used in managing the. Footnotes to s profiles Footnote 16 on page 13 of the PDS is deleted and replaced with the following text. 16 The gains its exposure to Australian shares by investing in an underlying fund/s which invest/s primarily in Australian listed or soon to be listed shares but may have up to 20% exposure to stocks outside Australia. The investment guidelines showing the s maximum investment in international shares do not include this potential additional exposure. Short positions may be part of the underlying Australian share funds strategy. Currency hedges may be used from time to time. PERPETUAL WHOLESALE FUNDS 2

3 Perpetual Wholesale s Product Disclosure Statement Issue number 6 dated 1 June 2011 for indirect investors only Issued by Perpetual Investment Management Limited ABN AFSL

4 Important notes In this PDS, s means Perpetual Wholesale s collectively and means one of the s, or a particular within Perpetual Wholesale s, as the context requires. Each is a managed investment scheme that is registered with the Australian Securities and Investments Commission (ASIC). References in this PDS to we, us, our, Perpetual Investments and Perpetual are to Perpetual Investment Management Limited as the responsible entity of the s and the issuer of units in the s and this PDS. Perpetual Investment Management Limited is a wholly owned subsidiary of Perpetual Limited (ABN ). Perpetual Group means Perpetual Limited and its subsidiaries. We authorise the use of this PDS as disclosure only for indirect investors who wish to access the s through an investor directed portfolio service (IDPS), IDPS-like scheme, or a nominee or custody service (collectively referred to in this PDS as a Service ). As an investor gaining exposure to the s through a Service, you do not yourself become an investor in the. Instead it is the Service operator, which invests for you, that has the rights of a member. Certain provisions of the s constitutions are not relevant to indirect investors. For example, indirect investors cannot attend member meetings or transfer or mortgage units in a. You can request reports on your investment from the Service operator and you should direct any inquiries to them. You or your refers to indirect investors in the s. This PDS describes the important features of the s. You should read it carefully before you decide to invest as it will help you to decide whether the s are appropriate for you. It contains general information only and doesn t take into account your specific investment goals. This PDS may also help when comparing the s to others you may be considering. We may update this PDS (as well as the terms and features of the s where we can according to the s constitutions and the law) with changes that are not materially adverse without issuing a supplementary PDS. The PDS and updated information will be available at our website and you can also obtain a paper copy free of charge, on request. If we become aware of any change that is materially adverse, we ll replace this PDS or issue a supplementary PDS. If there is an increase in fees or charges (other than government fees or charges), we ll give your Service operator at least 30- days prior written notice. You should keep a copy of the current PDS and any supplementary PDS for future reference. You can access further information that has been made publicly available, that might influence your decision, by contacting us. We ll tell you if there is a charge for this information. Visit our website or contact us for the most up-to-date past investment returns for the s. Past investment returns are not indicative of future returns, so you shouldn t base your decision to invest in the s on past investment returns. Neither we nor any company in the Perpetual Group guarantee that you will earn any return on your investment or that your investment will gain in value or retain its value. Investment in the s is subject to investment risk, including possible delays in repayment and loss of income and capital invested. This PDS can only be used by investors receiving it (electronically or otherwise) in Australia. All amounts in this PDS are in Australian dollars and all times quoted are Sydney time (unless otherwise specified). A business day is a working day for Perpetual in Sydney. We recommend that you seek financial advice before making an investment decision. If you have questions about investing in the s, you should speak to your financial adviser. You should consider the tax implications of investing in the s, which your financial and/or tax adviser will be able to help you with.

5 Contents Important notes inside front cover Welcome to Perpetual Wholesale s 2 The key benefits of investing 2 About the investment manager 2 Asset classes available 3 Understanding investment risk 4 The risks of investing 4 How we manage these risks 5 s profiles 6 Additional investment information 14 Use of derivatives 14 Environmental, social and ethical factors and labour standards 14 Additional information about the mortgage and property s 15 Fees and other costs 16 Fees and other costs 16 Additional explanation of fees and costs 17 Example of annual fees and costs for Perpetual Wholesale Balanced Growth 20 Additional information 24 Registered managed investment schemes 24 Multiple unit classes 24 Your cooling-off rights 24 How units are priced and investments are valued 24 Reporting 24 Continuous disclosure documents 24 Your privacy 25 Inquiries and complaints 25 Investments and social security 25 Our role as responsible entity 25 Constitutions 25 Borrowing powers 25 Our liability 25 Suspension of applications and withdrawals 25 Non-liquid s 25 Incorporation by reference 26 Applying for an investment 26 Contact details back cover How the s operate 21 Investments 21 Withdrawals 21 Distributions 22 Interest earned on application, withdrawal and distribution accounts 22 Tax 23 Tax position of the s 23 Australian resident investors 23 Non-resident investors 23 Tax file number (TFN)/ Australian business number (ABN) 23 Goods and services tax (GST) 23 PERPETUAL WHOLESALE FUNDS 1

6 Welcome to Perpetual Wholesale s The key benefits of investing Perpetual Wholesale s provide access to a suite of investment funds managed by Perpetual where you can choose to invest in: a single asset class fund(s), including Australian and international shares, property, mortgages and fixed income a multi asset class fund(s) where we determine the allocation of investments between various asset classes. This gives you the flexibility to structure an investment portfolio to best suit your needs. About the investment manager Perpetual Investments is one of Australia s leading investment managers, with $28.2 billion in funds under management (as at 31 March 2011). Perpetual Investments is part of the Perpetual Group, which has been in operation for more than 120 years. By employing some of the industry s best investment specialists and applying a proven investment philosophy, Perpetual Investments has been able to help generations of Australians manage their wealth. We may from time to time appoint external specialist investment managers to manage one or more asset classes in the s in whole or in part. Details about any current external specialist investment managers at any time are available at our website (see Incorporation by reference on page 26 for details) or can be obtained free of charge by contacting us. We may also invest in other external managed investment funds from time to time. PERPETUAL WHOLESALE FUNDS 2

7 Asset classes available The main asset classes that the s may invest in are shown in the following table. The s may also invest in other types of assets (see s profiles on pages 6-13 for details). The main asset classes Asset class Risk 1 Description of investment Cash Low Cash investments include discount securities (eg bank bills), short-term deposits and money market funds which may invest in fixed income instruments and loans. Cash provides a relatively consistent rate of return in the form of regular interest payments, generally in line with short-term interest rates and is widely considered the lowest investment risk. Enhanced cash Low Enhanced cash investments include cash investments, fixed income instruments, hybrids, loans and other income generating securities. The maturity dates of investments are typically longer than cash and they may have a lower credit rating than those in a money market fund, however, they are usually managed to short interest rate exposures. Mortgages Low to moderate A mortgage investment involves lending money to a borrower to buy property. The borrower must offer adequate collateral to secure the loan. The interest payments on the loan represent the return on the mortgage investment. Fixed income Low to moderate Fixed income instruments involve investing in securities issued by an issuer for a predetermined period. The issuers may include governments, banks, corporations and asset backed trusts. The instruments when issued usually provide a return in the form of defined periodic income payments and the return of principal at maturity. These income payments are either fixed when issued or set periodically against a benchmark. Property Moderate to high A property investment involves buying shares that represent a portion of ownership in a property related security, buying units in a listed or unlisted property trust or buying property directly. Property investments can be in a range of sectors including commercial, industrial, residential and retail. Returns are usually generated from rental income and changes in the value of the underlying properties. Shares High Shares represent a portion of ownership in a company. Shareholders can benefit if a company passes on some of its profits to them through dividends and/or from capital growth if the share price rises. 1 See Understanding investment risk on page 4 for an explanation of the risks of investing. PERPETUAL WHOLESALE FUNDS 3

8 Understanding investment risk The risks of investing All investments are subject to risk which means the value of your investment may rise or fall and/or you may not be able to withdraw your investment within the expected timeframe. Before making an investment decision, it s important to understand the risks that can affect the value of your investment. While it s not possible to identify every risk relevant to investing in the s, we have detailed below the significant risks that may affect your investment. An investment within an asset class may not necessarily be exposed to each of the risks. Volatility is an important measure of overall investment risk. It generally refers to the fluctuation in the value of an asset, index or other type of security over a given period. The greater the volatility of an asset, index or security, the larger the fluctuations between its high and low values and the greater the fluctuations in its returns. Your financial adviser can assist you in determining which s are suited to your financial needs. Type of risk Investment risk Market and economic risk Asset risk Currency risk Interest rate risk Credit risk Liquidity risk Derivatives risk Counter-party risk Legal and regulatory risk Investment strategy risks Description of risk The value of your investment may fall for a number of reasons, including the risks set out below, which means that you may receive back less than your original investment when you withdraw. Certain events may have a negative effect on the price of all types of investments within a particular market. These events may include changes in economic, social, technological or political conditions, as well as market sentiment. A particular asset that a fund invests in may fall in value, which can result in a reduction of your investment. For investments in international assets, which have currency exposure, there is potential for adverse movements in exchange rates to reduce their Australian dollar value. For example, if the Australian dollar rises, the value of international investments expressed in Australian dollars can fall. Changes in interest rates may have a negative impact, either directly or indirectly, on investment returns. The issuer or party to a transaction may not repay the principal, make interest payments or fulfil other financial obligations in full and/or on time. The market value of an investment can also fall significantly when the perceived risk of a note or bond increases or its credit rating declines. The absence of an established market or shortage of buyers for an investment can result in a loss if the holder of the investment needs to sell it within a particular timeframe. A shortage of liquidity can also result in delays in the payment of withdrawals from a fund see Withdrawals on page 21 and Suspension of applications and withdrawals on page 25 for further information. Derivative market values can fluctuate significantly and, as a result, potential gains and losses can be magnified. Losses can occur where the value of the derivative fails to move in line with the underlying asset or where a greater exposure to a market is created through the derivative position than is backed by the assets of a fund. Other risks applying to derivatives include counter-party risk and liquidity risk, where the derivative position is difficult or costly to reverse. See Use of derivatives on page 14 for further information about how derivatives may be used by the investment managers. A loss may occur if the other party to a contract, including derivatives contracts or lending arrangements (cash or stocks), defaults on their obligations under the contract. Changes in legislation and other rules in domestic and foreign markets, including those dealing with taxation, accounting and investments, may adversely impact your investment. A fund s investment strategy may involve specific risks. These include gearing risk, short-position risk, prime broker risk and portfolio concentration risk see Investment strategy risks on this page for details. Investment strategy risks Gearing risk With gearing, the investment manager borrows money from a lender to increase the amount the fund can invest. While this can result in larger investment gains in a rising market, it is also likely to magnify losses in a falling market. Gearing increases the volatility of a fund s investment returns. Consequently, a geared fund is considered to have a higher investment risk than a comparable fund that is ungeared. The returns of a geared fund depend on the types of investments in it as well as the level of gearing and the costs of borrowing, including interest rates. The greater the level of gearing, the greater the potential for loss of capital. As the following example shows, a 10% fall in the market value of assets in an ungeared fund could translate into a 20% fall in the value of the same portfolio in a geared fund with a gearing level of 50% (excluding fees and borrowing costs). PERPETUAL WHOLESALE FUNDS 4

9 Example Your investment amount $1,000 $1,000 gearing level nil 50% Amount borrowed by fund n/a $1,000 Amount invested in the market $1,000 $2,000 If the value of the fund s assets falls by 10%: Fall in value of fund s assets $100 $200 Value of fund s assets after fall $900 $1,800 Outstanding loan n/a $1,000 Value of your investment $900 $800 Loss of investment capital $100 $200 Effective rate of loss 10% 20% Consequently, the greater the level of gearing, the less the fall in asset value needs to be for a greater loss of your investment capital. The gearing level may change regularly due to factors such as market movements, applications, withdrawals or changes to the amount borrowed. In certain circumstances, it may be necessary to suspend withdrawals to manage the fund s gearing position within its approved limits and protect the interests of all investors in the fund. The lender may have the right to reduce the gearing level set for the geared fund or terminate the lending facility. This means that a geared fund may need to promptly reduce the gearing level by selling assets, which may force the sale of assets at unfavourable prices. To control this risk, the investment manager may establish alternate sources of funding to limit the exposure to any one lender. Short-position risk Where permitted, a short position can be created when a fund sells a borrowed security before buying it back from the open market to return to the securities lender. If the security rises in value, the fund makes a loss because it buys it back for more than it was sold. Establishing a short position in a security involves a higher level of risk than investing in a security. This is because when you invest in a security, the maximum loss is generally limited to the amount invested. With short positions there is no limit on the maximum loss because there is no upper limit on the security s price. In other words, the loss will continue to increase as the security s price rises. Prime broker risk Perpetual engages a prime broker to provide financing for gearing and stock for the borrowing and lending of securities in the Perpetual Wholesale Geared Australian and Perpetual Wholesale SHARE-PLUS Long- Short, as well as settlement services for these s and any other services agreed between the parties. When one of these s borrows securities or cash, the prime broker is entitled to take collateral from the assets of the particular. Any assets taken by the prime broker may be used by the prime broker for its own purposes (including lending those assets to third parties) for the period that the retains the relevant liability. Therefore, there is a risk that if the prime broker becomes insolvent whilst the remains indebted to the prime broker, the assets of the may not be returned in full. Portfolio concentration risk Investing in a with a smaller number of investments may lead to more volatile returns than investing in a with a more diversified portfolio. Other risks The following risks are inherent within any managed investment scheme: The investment professionals employed by a fund s investment manager may change, which may affect the future performance of that fund. Investing in a fund may have a different tax outcome than investing directly because of the application of tax laws to the fund and the impact of investments and withdrawals by other investors. One result is that you may receive back some of your capital as income in a distribution. Transactions may be suspended, which may result in delays in paying withdrawal requests. A fund may be terminated. How we manage these risks We can t eliminate investment risks, however we aim to manage the impact of these risks by setting consistent and carefully considered investment guidelines. A further risk is that the securities lender may recall a borrowed security, so the fund will have to find another securities lender willing to lend the security, or may have to buy the security quickly at an unfavourable price. PERPETUAL WHOLESALE FUNDS 5

10 s profiles Asset class Page Mortgages Fixed income Property Australian shares Perpetual Wholesale Monthly Income Perpetual Wholesale Diversified Income Perpetual Wholesale Dynamic Fixed Income Perpetual Wholesale Property Income Perpetual Wholesale Property Securities Perpetual Wholesale Industrial 8 Perpetual Wholesale Australian Perpetual Wholesale Concentrated Equity Perpetual Wholesale Ethical SRI Perpetual Wholesale Geared Australian Perpetual Wholesale SHARE-PLUS Long-Short Perpetual Wholesale Smaller Companies Suggested length of investment This is a guide only and not a recommendation. You should discuss your investment in the (s) with your financial adviser to ensure that it meets your needs. Distribution frequency and dates The distribution frequency is how often the usually makes a distribution. The distribution dates are the effective dates for distributions. The actual payment of distributions occurs after the distribution date (see Distributions on page 22 for details). Withdrawals This shows how often you are able to withdraw from your investment in the (s) under normal operating conditions (see Withdrawals on page 21 for details). Objective The objective is a summary of what the aims to achieve. Investment approach This is the method or principles that the investment manager uses, either directly or indirectly, to manage the to meet its objectives. International shares Perpetual Wholesale Global Resources Perpetual Wholesale International Share Investment guidelines This provides an indication of what the will invest in directly or indirectly. Diversified conservative Diversified balanced Perpetual Wholesale Conservative Growth Perpetual Wholesale Diversified Growth Footnotes See page 13 for details of any footnotes. Diversified growth Perpetual Wholesale Balanced Growth 12 Perpetual Wholesale Split Growth 12 The s profiles on pages 7-13 provide a summary of the s offered within Perpetual Wholesale s. For more details and any updated information about the s, visit our website or contact us. The following information explains certain terms and concepts detailed in the s profiles. Commencement date This is the month and year that the received its first investment. Management cost This represents all of the management costs (except for any abnormal operating expenses) associated with managing and administering the (see Management costs in the Fees and other costs section on page 17 for details). Management costs may vary in the future. PERPETUAL WHOLESALE FUNDS 6

11 s profiles MORTGAGES FIXED INCOME FIXED INCOME Perpetual Wholesale Monthly Income Perpetual Wholesale Diversified Income Perpetual Wholesale Dynamic Fixed Income Commencement date July 2000 October 2005 November 2010 Management cost (pa) 0.785% 0.700% 0.700% Suggested length of investment Three years or longer Three years or longer Three years or longer Distribution frequency and dates Monthly as at the end of each calendar month Quarterly 31 March, 30 June, 30 September and 31 December Quarterly 31 March, 30 June, 30 September and 31 December Withdrawals Quarterly 1 Each business day Each business day Objective Aims to provide investors with capital stability and a regular monthly income by investing predominantly in a pool of quality first registered Australian direct commercial mortgages. Aims to provide regular income and consistent returns above the UBS Bank Bill Index over rolling three-year periods (before fees and taxes) by investing in a diverse range of income generating assets. Aims to provide: capital stability and regular income by investing in a diversified range of income generating assets a positive return (before fees and taxes) irrespective of market conditions over a rolling three-year period. Investment approach Perpetual aims to achieve the objective by investing in quality first registered mortgages, generally with three-year terms, held over freehold and leasehold land and buildings in Australian capital cities and major regional centres, applying a certain mortgage selection criteria to manage mortgage risk. The also invests in cash, enhanced cash and fixed income securities. Derivatives may be used in managing the. The 's approach to delivering returns and managing risk is through an active and risk aware investment process which invests in a diversified core portfolio of liquid investment grade credit securities. Perpetual believes these assets provide investors with protection in times of market stress. When the environment is supportive Perpetual seeks to enhance returns by taking more risk whether that be in maturity, credit rating, subordination or gearing. The can also invest in alternative income generating securities such as mortgages, infrastructure debt and private debt. This approach to portfolio construction is Perpetual s preferred method to deliver investors the highest possible risk adjusted returns. Derivatives may be used in managing the. Perpetual aims to achieve the objective by: actively managing the credit risk through: diversifying the among different securities issued by various borrowers actively managing for changes in market-wide and security-specific credit margins identifying and investing in relative value within the universe of credit securities managing duration risk considering a variety of factors, including valuations and current market conditions. Derivatives may be used in managing the. Investment guidelines Invests predominantly in first registered mortgages. We intend to maintain a minimum cash, enhanced cash and fixed income level of 25% of the net asset value of the. 2 This amount may be greater due to cash flows and lending requirements. Cash and investment grade securities % Sub-investment grade securities 4 and non-rated securities 0-25% Mortgages and other private debt % Gearing level 0-25% (of the s net asset value) Fixed rate exposure 0-100% Floating rate exposure 0-100% Interest rate duration 0-4 years Cash and investment grade securities % Sub-investment grade securities 4 and non-rated securities 0-40% You should refer to page 13 for details of footnotes. PERPETUAL WHOLESALE FUNDS 7

12 s profiles PROPERTY PROPERTY AUSTRALIAN SHARES Perpetual Wholesale Property Income Perpetual Wholesale Property Securities Perpetual Wholesale Industrial Commencement date October 2004 December 1991 September 1996 Management cost (pa) 0.900% % 0.990% Suggested length of investment Five years or longer Five years or longer Five years or longer Distribution frequency and dates Quarterly 31 March, 30 June, 30 September and 31 December Quarterly 31 March, 30 June, 30 September and 31 December Half-yearly 30 June and 31 December Withdrawals Each business day Each business day Each business day Objective Aims to provide stable income and long-term capital growth by investing in both listed property related securities and unlisted property funds. Aims to provide long-term capital growth and income by investing in listed property related securities. Aims to provide long-term capital growth and regular income through investment in quality Australian industrial shares. Investment approach Perpetual focuses on selecting property investments that represent the best quality and value relative to other property investments in the market. Perpetual will seek to identify investments that demonstrate: quality assets conservative debt sound business and capital management. The may invest in listed property trusts, listed real estate management and development companies, unlisted property funds or other property related vehicles. The invests primarily in Australia but at times it may have some Asian listed property exposure. Derivatives may be used in managing the. Perpetual focuses on selecting listed property related securities that represent the best investment quality and value relative to other property securities in the market. Perpetual will seek to identify property securities that demonstrate: quality assets conservative debt sound business and capital management. The may invest in listed property trusts and listed real estate management and development companies. The invests primarily in Australia but at time it may have some Asian listed property exposure. Derivatives may be used in managing the. Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: conservative debt levels sound management quality business and recurring earnings. Derivatives may be used in managing the. Investment guidelines Unlisted property 20-80% Listed property % Other property 0-5% Cash 0-20% The s asset allocation may vary outside the above ranges if the size is $50 million or less. Listed property % Cash 0-10% Australian industrial shares % Cash 0-10% You should refer to page 13 for details of footnotes. PERPETUAL WHOLESALE FUNDS 8

13 s profiles AUSTRALIAN SHARES AUSTRALIAN SHARES AUSTRALIAN SHARES Perpetual Wholesale Australian Perpetual Wholesale Concentrated Equity Perpetual Wholesale Ethical SRI Commencement date February 1997 August 1999 April 2002 Management cost (pa) 0.990% 1.100% 1.175% Suggested length of investment Five years or longer Five years or longer Five years or longer Distribution frequency and dates Half-yearly 30 June and 31 December Half-yearly 30 June and 31 December Half-yearly 30 June and 31 December Withdrawals Each business day Each business day Each business day Objective Aims to provide long-term capital growth and income through investment in quality shares. Aims to provide long-term capital growth and income through investment in quality shares. Aims to provide long-term capital growth and income through investment in quality shares of socially responsible companies. Investment approach Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: conservative debt levels conservative debt levels conservative debt levels sound management sound management sound management quality business and quality business and quality business and in the case of industrial shares, recurring earnings. Derivatives may be used in managing the. in the case of industrial shares, recurring earnings. The 's investment portfolio will typically consist of between 20 and 45 stocks. Derivatives may be used in managing the. in the case of industrial shares, recurring earnings. In addition to the above investment approach, Perpetual utilises a strategy for screening ethical and socially responsible investments (see Environmental, social and ethical factors and labour standards Perpetual Wholesale Ethical SRI on page 14). Derivatives may be used in managing the. Investment guidelines Australian shares % Cash 0-10% Australian shares % Cash 0-10% Australian shares % Cash 0-10% You should refer to page 13 for details of footnotes. PERPETUAL WHOLESALE FUNDS 9

14 s profiles AUSTRALIAN SHARES AUSTRALIAN SHARES AUSTRALIAN SHARES Perpetual Wholesale Geared Australian Perpetual Wholesale SHARE-PLUS Long-Short Perpetual Wholesale Smaller Companies Commencement date March 2003 March 2003 October 1996 Management cost (pa) 1.170% % (plus performance fee 10 ) 1.250% Suggested length of investment Seven years or longer Five years or longer Five years or longer Distribution frequency and dates Half-yearly 30 June and 31 December Half-yearly 30 June and 31 December Half-yearly 30 June and 31 December Withdrawals Each business day Each business day Each business day Objective Aims to enhance long-term capital growth through borrowing (gearing) to invest in quality shares. Aims to provide long-term capital growth and income through investment in quality shares and taking short positions in selected Australian shares. Aims to provide long-term capital growth and income through investment in quality Australian shares which, when first acquired, do not rank in the S&P/ASX 50 Index. Investment approach Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: conservative debt levels sound management quality business and in the case of industrial shares, recurring earnings. The gearing level of the must be kept within predetermined guidelines. Within these, Perpetual aims to ensure that the gearing level is maximised, subject to the cost of borrowing being adequately covered by net income. Derivatives may be used in managing the, including for gearing purposes. Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: conservative debt levels sound management quality business and in the case of industrial shares, recurring earnings. In addition, Perpetual aims to take short positions in Australian shares that it believes will fall in value. The short positions are determined based on each stock s expected returns and the investment constraints (designed to reduce the risks associated with taking short positions). Derivatives may be used in managing the. Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: conservative debt levels sound management quality business and in the case of industrial shares, recurring earnings. Derivatives may be used in managing the. Investment guidelines Australian shares % Cash 0-10% Gearing level % Australian shares % Short positions in Australian shares % Australian shares 7 (net) % Cash 0-35% Australian smaller company shares % Cash 0-20% You should refer to page 13 for details of footnotes. PERPETUAL WHOLESALE FUNDS 10

15 s profiles INTERNATIONAL SHARES INTERNATIONAL SHARES DIVERSIFIED CONSERVATIVE Perpetual Wholesale Global Resources Perpetual Wholesale International Share Perpetual Wholesale Conservative Growth Commencement date November 2006 April 1997 September 2003 Management cost (pa) 1.350% for Class B units % 0.900% 14 Suggested length of investment Seven years or longer Five years or longer Three years or longer Distribution frequency and dates Half-yearly 30 June and 31 December Yearly 30 June Quarterly 31 March, 30 June, 30 September and 31 December Withdrawals Each business day Each business day Each business day Objective Aims to provide long-term capital growth through investment in quality global resource shares. Aims to provide long-term capital growth through investment in international shares. Aims to provide moderate growth over the medium term and income through investment in a diversified portfolio with an emphasis on cash, enhanced cash and fixed income securities. Investment approach Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual s priority is to select companies that represent the best investment quality and are appropriately priced. In determining investment quality, investments are carefully selected on the basis of four key investment criteria: conservative debt levels sound management quality business and the ability to generate recurring earnings. The s investment portfolio will typically consist of between 20 and 50 global resource shares and related service companies. Currency hedges may be used from time to time. Derivatives may be used in managing the. Perpetual adopts a fundamental, bottom-up approach to stock selection focusing on quality companies with attractive valuations within a global framework. Currency hedges may be used from time to time (up to 30% of the value of the ). Derivatives may be used in managing the. Perpetual invests in a diverse mix of assets (such as Australian shares, international shares, fixed income, property, enhanced cash and other investments). 15 Tactical asset allocation strategies may be applied. This process involves the adjusting its exposure to asset classes on a regular basis within the investment guidelines. Currency hedges may be used from time to time. Derivatives and exchange traded funds may be used in managing each asset class. Investment guidelines Global resource shares % Cash 0-20% International shares % Cash 0-10% Australian shares % International shares 0-20% Property 0-10% Fixed income 25-55% Cash and enhanced cash % Other investments % You should refer to page 13 for details of footnotes. PERPETUAL WHOLESALE FUNDS 11

16 s profiles DIVERSIFIED BALANCED DIVERSIFIED GROWTH DIVERSIFIED GROWTH Perpetual Wholesale Diversified Growth Perpetual Wholesale Balanced Growth Perpetual Wholesale Split Growth Commencement date October 2001 October 1997 March 1999 Management cost (pa) 0.960% % % Suggested length of investment Three years or longer Five years or longer Five years or longer Distribution frequency and dates Quarterly 31 March, 30 June, 30 September and 31 December Half-yearly 30 June and 31 December Yearly 30 June Withdrawals Each business day Each business day Each business day Objective Aims to provide long-term capital growth and regular income through investment in a diversified portfolio of growth and income assets. Aims to provide long-term capital growth and income through investment in a diversified portfolio with an emphasis on Australian and international share investments. Aims to achieve long-term capital growth through investment in a mix of international shares and Australian industrial shares and other securities with lower risk than 100% exposure to either asset class. Investment approach Perpetual invests in a diverse mix of assets (such as Australian shares, international shares, fixed income, property, enhanced cash and other investments). 15 Tactical asset allocation strategies may be applied. This process involves the adjusting its exposure to asset classes on a regular basis within the investment guidelines. Currency hedges may be used from time to time. Derivatives and exchange traded funds may be used in managing each asset class. Perpetual invests in a diverse mix of assets (such as Australian shares, international shares, fixed income, property, enhanced cash and other investments). 15 Tactical asset allocation strategies may be applied. This process involves the adjusting its exposure to asset classes on a regular basis the investment guidelines. Currency hedges may be used from time to time. Derivatives and exchange traded funds may be used in managing each asset class. Perpetual adopts a fundamental, bottom-up approach to stock selection focusing on quality companies. Perpetual s priority is to select those companies that represent the best investment quality and are appropriately priced. Currency hedges may be used from time to time. Derivatives may be used in managing the. Investment guidelines Australian shares % International shares 10-30% Property 0-15% Fixed income 15-45% Cash and enhanced cash % Other investments % Australian shares % International shares 10-50% Property 0-15% Fixed income 5-35% Cash and enhanced cash % Other investments % International shares and Australian industrial shares % Cash 0-10% You should refer to page 13 for details of footnotes. PERPETUAL WHOLESALE FUNDS 12

17 Footnotes to s profiles 1 See Perpetual Wholesale Monthly Income under Withdrawals on page 21 for details. 2 This may be affected by the level of quarterly withdrawal requests and our ability to sell underlying assets. 3 Investment grade is a term given to securities that have a high probability of payment of interest and repayment of principal. 4 Sub-investment grade is a term given to securities where there is a higher risk that the issuer may not be able to meet interest payments or the repayment of principal if difficult conditions arise. The predominantly invests in investment grade securities, but we may increase our sub-investment grade exposure under favourable economic conditions. Sub-investment grade securities may include, but are not limited to, non-rated securities, hybrids, mortgages, mezzanine mortgages and private debt. 5 The may also invest in unlisted property funds which charge a performance-based fee. If these performance fees occur, they will be an additional cost to you. 6 The invests primarily in Australia but may have up to 20% exposure to Asian listed property related investments. Currency hedges may be used from time to time. 7 The invests primarily in Australian listed or soon to be listed shares but may have up to 20% exposure to stocks outside Australia. Currency hedges may be used from time to time. 8 The percentage quoted is based on the s gross asset value. If the average gearing level is 50%, the management cost will be 2.340% of net asset value. If the average gearing level over the year is higher than 50%, the management cost will be higher than 2.340%. 9 The gearing level is the s borrowings divided by the total gross value of assets. It will depend on the present levels and future expectation of the s net income (income after fees and expenses and excluding franking credits) and the cost of borrowings. If the s gearing level exceeds 60% (due to withdrawals or negative market movements), Perpetual will reduce the gearing level to 60% (or lower) within a reasonable period of time by repaying part of the borrowings through inflows or selling some of the s assets. 10 Perpetual charges the a performance fee if its investment performance (as a whole) exceeds its performance hurdle and other conditions are met see Performance fees on page 17 for details. 11 The will pay the securities lender a management cost on borrowed stocks. The management cost varies on a stock by stock basis but is usually within the range of 0.50% pa to 5.00% pa of the market value of the stock. 12 The net market exposure is the value of Australian shares, adjusted for the value of short positions in Australian shares. 13 See Multiple unit classes on page 24 for details. 14 The may also invest in underlying funds which charge a performance-based fee. If these performance fees occur, they will be an additional cost to you. 15 Perpetual may allocate up to 30% of the portfolio to other investments, which may include infrastructure, mortgages (including mezzanine mortgages) and alternative investments such as private equity, emerging market debt, opportunistic property, absolute return funds, specialist credit, commodities and diversified beta funds. The additional exposure to other investments enhances the s diversification and may help reduce volatility. 16 The gains its exposure to Australian shares by investing in an underlying Australian share fund which invests primarily in Australian listed or soon to be listed shares but may have up to 20% exposure to stocks outside Australia. Currency hedges may be used from time to time. The investment guidelines showing the s maximum investment in international shares do not include this potential additional exposure. 17 This may invest in enhanced cash funds that allow gearing. PERPETUAL WHOLESALE FUNDS 13

18 Additional investment information Use of derivatives A derivative is a financial instrument that derives its value from the price of a physical security or market index. Derivatives may be used in the management of the s for a range of investment activity including but not limited to the purposes below. This will differ between fund types, as shown. Derivatives may also be used to add to the gearing levels of portfolios for s that are authorised to gear. Mortgages Derivatives may be used to manage actual and anticipated interest rate risk. Fixed Income Derivatives may be used: to manage actual and anticipated interest rate and credit risk, currency risk and credit exposure for hedging, arbitrage, as a replacement for trading a physical security and for managing the duration of the. Property, Australian Shares and International Shares Derivatives may be used: to adjust currency exposure (where appropriate) to hedge selected shares or securities against adverse movements in market prices to gain exposure to relevant indices to gain short-term exposure to the market to build positions in selected companies or issuers of securities as a short-term strategy to be reversed as the physical positions are built up as an alternative to the direct purchase or sale of underlying investments or creating market exposure where there are transactional, tax or cost efficiencies to create a short exposure to a stock for s authorised to take net negative positions. Diversified s The Diversified s can use derivatives directly or indirectly for the same purposes as those above for the Fixed Income, Property, Australian Shares and International Shares s. Derivatives may also be used in the Diversified s to manage strategic and tactical asset allocation strategies. Environmental, social and ethical factors and labour standards Perpetual Wholesale Ethical SRI Perpetual evaluates companies that meet the investment approach, set out in the s profiles on page 9, on a range of social and ethical issues to determine their suitability for inclusion in this s portfolio. We seek to invest in quality companies that have satisfied our range of ethical and socially responsible investment criteria. We take into account environmental, social and ethical considerations for the purpose of selecting, retaining or realising the investments in the portfolio. There are two main steps to the process, namely ethical exclusions and socially responsible investments (SRI) screening, utilising research from external specialists. Ethical exclusions We don t invest in companies that derive a material proportion of their revenue from the manufacture or sale of alcohol or tobacco, the operation of gambling facilities or the manufacture of gambling equipment, uranium extraction or the manufacture of weapons or armaments. SRI screening Companies remaining after the ethical exclusions are then subject to an SRI screening to evaluate how their business practices impact society and the environment. The SRI screening involves three steps: 1. Negative screens: Companies are rated on their negative environmental or social impacts and practices in relation to a number of criteria including human rights, labour standards, the environment, corporate governance, animal rights and genetically modified organisms. 2. Positive screens: Companies are rated on their positive environmental or social impacts and practices in relation to a number of criteria including renewable energy, waste (direct and down stream), corporate governance, use of quality and environmental management systems, and employee health and safety. 3. Universe inclusion: Scores from all negative and positive screens are then combined. Companies that score positively become allowable investments while companies with negative scores are excluded. The s investments are regularly reviewed to determine whether they continue to pass the ethical SRI screening process when updated information is received. If we become aware that the is invested in a company that no longer passes the ethical SRI screening process, the investment will be sold as soon as practical, in an orderly, price-sensitive manner. PERPETUAL WHOLESALE FUNDS 14

19 Where a company is not covered by one or both of our research providers we may invest in the stock (following preliminary internal analysis) until coverage is initiated. Should the stock fail the screening process when coverage commences the stock will be sold as described above. In rare circumstances where an issue that has caused an exclusion is deemed to be minor we may override the exclusion for that issue, or for a period of time while the company rectifies the issue. These decisions are made independently of the s portfolio manager to ensure conflicts of interest do not occur. Emerging issues are monitored to ensure that the screening criteria remains relevant and in the spirit of the. From time to time, and with the advice of our research providers, we may alter the screening criteria to take account of these emerging issues. We may engage with companies that are at risk from emerging issues to encourage them to consider the issue and improve their practices. We can modify the screening process for Perpetual Wholesale Ethical SRI at any time. The Certification Symbol signifies that a product or service offers an investment style that takes into account environmental, social, governance or ethical considerations. The Symbol also signifies that Perpetual Investment Management Limited has adopted strict disclosure practices required under the Responsible Investment Certification Program for the category of Manager. The Certification Symbol is a Registered Trade Mark of the Responsible Investment Association Australasia (RIAA). Detailed information about RIAA, the Symbol and Perpetual Investment Management Limited s methodology, performance and stock holdings can be found at together with details about other responsible investment products certified by RIAA. 1 1 The Responsible Investment Certification Program does not constitute financial product advice. Neither the Certification Symbol nor RIAA recommends to any person that any financial product is a suitable investment or that returns are guaranteed. Appropriate professional advice should be sought prior to making an investment decision. RIAA does not hold an Australian Financial Services Licence. Additional information about the mortgage and property s Perpetual Wholesale Monthly Income To improve the disclosure of information about mortgage funds in Australia, ASIC requires us to provide information about certain benchmarks, as follows: liquidity scheme borrowing portfolio diversification related party transactions valuation policy lending principles loan-to-valuation ratios distribution practices withdrawal arrangements. Information on these benchmarks and how we address them, which forms part of the PDS and is updated quarterly, is available at our website (see Incorporation by reference on page 26 for details) or you can obtain a copy free of charge by contacting us. Perpetual Wholesale Property Income To improve the disclosure of information about unlisted property funds in Australia, ASIC requires us to provide information about certain benchmarks, as follows: gearing ratio interest cover scheme borrowing portfolio diversification valuation policy related party transactions distribution practices withdrawal arrangements. Information on these benchmarks and how we address them, which forms part of the PDS and is updated quarterly, is available at our website (see Incorporation by reference on page 26 for details) or you can obtain a copy free of charge by contacting us. Other s Apart from Perpetual Wholesale Ethical SRI, we don t take into account labour standards or environmental, social or ethical considerations when selecting, retaining or realising investments and consider each investment based on its individual merits, but occasionally they may impact the purchase, sale or retention of an individual investment if we think they could adversely impact returns. PERPETUAL WHOLESALE FUNDS 15